REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2241  OF 2009 (Arising out of SLP (C) No.20207 of 2007)

Rani Gupta & Ors. … Appellants

Versus

M/s. United India Insurance Co. Ltd. & Ors. … Respondents

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. This  appeal  is  directed  against  the  judgment  and  order  dated

31.5.2007  passed  by  the  High  Court  of  Delhi  in  MAC No.986  of  2006

whereby and whereunder an appeal preferred by the first respondent herein

under Section 173 of the Motor Vehicles Act, 1988 (for short, ‘the Act’)

was allowed.

3. Appellant filed an application before the Motor Vehicles Accidents

Claims Tribunal praying for payment of compensation for the death of her

husband Praveen Kumar Gupta who was travelling in a private Indica Car

driven by his friend Shri Avtar Singh.  

Shri  Ankit  and Shri  Rajendra  Jindal  (the  deceased)  were  returning

from Agra after  attending  some business  promotion  work.   The accident

took  place  as  the  said  car  ran  into  a  tree.   Praveen  Kumar  Gupta  and

Rajendra Jindal died on the spot.  Ankit suffered injuries.

4. Before the learned Tribunal, one of the questions which was raised is

as  to  whether  a  passenger  in  a  car  which  was  being  driven  negligently

would be covered by the policy of insurance.

5. The learned Tribunal,  applying the principle  of  Res Ipsa Loquitor,

opined that  Shri  Avtar Singh was driving the car  rashly and negligently.

Having regard to the income tax returns filed by the deceased, the learned

Tribunal arrived at the finding that his annual income was Rs.1,87,500/-.  In

view of the age of the deceased and the children having attained the age of

majority,  multiplier  of  13  was  applied  in  determining  the  amount  of

compensation.  Upon deducting 1/3rd of the annual income towards personal

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use from his annual income, the total amount of compensation, thus, was

arrived at in the following terms :

“Annual Income Rs. 1,25,000

Future Increase in income Rs. 2,50,000

Rs. 3,75,000

Mean/Average income Rs. 1,87,500

Less: 1/3rd towards personal use An consumption Rs.    62,500

Annual Dependency Rs. 1,25,000

Hence

a) Loss of Financial dependency Rs. 16,25,000     (1,25,000 x 13)

b) Loss of consortium Rs.    25,000

c) Loss of love and affection Rs.    75,000     (25,000 X 3)

d) Funeral expenses Rs.    15,000

TOTAL COMPENSATION Rs.17,40,000”

6. First Respondent preferred an appeal thereagainst.

7. The  question  raised  before  the  High  Court  was  as  to  whether  the

deceased having been travelling as a gratuitous passenger in a private car

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would fall within the meaning of ‘third party’ and, thus, would be covered

by the statutory policy under Section 147 of the Act.   

The learned Judge noticed that the policy was “Private Car Package

Policy”  as  notified  by  the  Tariff  Advisory  Committee  with  effect  from

1.7.2002, the terms and conditions whereof are :

“SECTION II – LIABILITY TO THIRD PARTY

1. Subject to the limits of liability as laid down in  the  Schedule  hereto  the  Company  will indemnify the insured in the event of an accident caused by or arising out of the use of the vehicle against  all  sums which the insured shall  become legally liable to pay in respect of :

(i) death  of  or  bodily  injury  to  any  person including  occupants  carried  in  the  vehicle (provided such occupants are not carried for hire  or  reward)but  except  so  far  as  it  is necessary to meet the requirements of Motor Vehicles  Act,  the  Company  shall  not  be liable where such death or injury arises out of and in the course of the employment of such person by the insured.

(ii) Damage  to  property  other  than  property belonging to the insured or held in trust or in the custody or control of the insured.”

8. It was furthermore opined that the object and purpose of Section 146

and 147 is that policy of insurance should cover liability in respect of death

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or bodily injury of a person including owner of the goods or its authorized

representative who may be carried in a goods vehicle/carriage as defined in

Section 2(14) of the Act.

9. The learned Judge,  however,  having regard  to  several  decisions  of

this  Court  in  particular  UP  State  Road  Transport  Corporation v.  Trilok

Chand [(1996) 4 SCALE 22 = (1996) 4 SCC 362],  as also various other

decisions including New India Assurance Co. v. Kalpana & Ors. [(2007) 2

SCALE 227], opined that appropriate multiplier to be adopted was 10.  On

the  aforementioned  premise  loss  of  dependency  was  determined  at

Rs.1,87,500/-  per annum.  The learned Judge further  apportioned 2/3rd as

labour input, i.e., personal input of the deceased in business and treated 1/3rd

as yield from the capital asset, loss occasioned due to death of the deceased

was held to be Rs.12,50,000/-, stating :

“The  remaining  loss  of  Rs.6,25,000/-  could  be made good by the family by renting out the factory or after liquidating the capital asset investing the money in an annuity yielding income by way of interest.”

10. Mr.  Ashok K. Majhajan, learned counsel appearing on behalf of the

appellant, would contend that the High Court committed a serious error in

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applying  the  multiplier  of  10  only  as  in  terms  of  the  Second  Schedule

appended  to  the  Act,  the  appropriate  multiplier  which  should  have  been

applied is 13.  It was urged that for the purpose of calculation of annual

dependency, in a case of this nature, the High Court should have been kept

in view the backdrop of events, namely, the deceased who took loan for a

sum of  Rs.14,00,000/-  from the  bank  for  the  purpose  of  purchasing  an

industrial plot in NOIDA in 1985, had paid up the same.

11. Mr. A.K. De, learned counsel appearing on behalf of the respondent,

on the other hand, contended that the income of the deceased can only be

assessed on net earnings and what was actually lost is his labour and other’s

contributions to run his business, and, thus, the loss of dependency should

be determined on the value of such services or contribution of labour being

in the nature of skill and knowledge that he had been contributing thereto.

It was urged that indicator of the value of his services could only be the

profitability  of  the  business  which  must  be  shown and  established  upon

bringing on appropriate materials on record.   

12. Determination of the amount of compensation arising out of loss of

life of a person, who was the earning member of the family, would depend

upon a  large  number  of  factors;  one  of  them being  the  nature  of  job  or

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business  he  was  doing.   For  the  said  purpose,  an  average  gross  future

monthly income must be arrived at by adding the actual gross income at the

time of his death to the maximum which he might have got, had he not met a

pre-mature death.   

The learned Tribunal,  keeping in  view the  fact  that  within  a  short

time, appellant had been able to wipe off the entire loan taken by him from

the bank and, thus, became the owner of an industrial plot and furthermore

in view of the  fact  that  he was only aged 46 years at  the  relevant  time,

thought that his income would have doubled at the time of his death.  We

think that the approach of the learned Tribunal was correct.

13. This Court in Sarla Dixit v. Balwant Yadav [(1996) 3 SCC 179] took

into consideration the future prospect of the deceased in great details.  It

was held that multiplier method involving the ascertainment of the loss of

dependency  should  be  applied  in  appropriate  case.   It  took  into

consideration the decision of English Courts to opine that the said method is

appropriate.  It opined that only in severe cases, the said method should be

departed from.  As regards adoption of proper multiplier, it was held :

“7. So far as the adoption of the proper multiplier is  concerned,  it  was  observed  that  the  future prospects of advancement in life and career should

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also be sounded in terms of money to augment the multiplicand. While the chance of the multiplier is determined  by  two  factors,  namely,  the  rate  of interest  appropriate  to  a  stable  economy and  the age of the deceased or of the claimant whichever is higher, the ascertainment of the multiplicand is a  more  difficult  exercise.  Indeed,  many  factors have  to  be  put  into  the  scales  to  evaluate  the contingencies  of  the  future.  All  contingencies  of the future need not necessarily be baneful.”

14. Average life expectancy in India also is one of the factors which must

be taken into consideration for the purpose of calculating the average gross

future monthly income.  The average life expectancy in India is now 60-61

years.   It is necessary to subtract  personal and living expenses and other

statutory liabilities like payment of income tax etc.  

This Court in National Insurance Co. Ltd. v. Indira Srivastava [(2008)

2 SCC 763], held :

“17. This Court in  Asha did not address itself the questions raised before us. It does not appear that any  precedent  was  noticed  nor  the  term  “just compensation” was considered in the light of the changing  societal  condition  as  also  the  perks which are paid to the employee which may or may not  attract  income  tax  or  any  other  tax.  What would be “just compensation” must be determined having  regard  to  the  facts  and  circumstances  of each  case.  The  basis  for  considering  the  entire pay-packet is what the dependants have lost due to

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death  of  the  deceased.  It  is  in  the  nature  of compensation  for  future  loss  towards  the  family income.

19. The amounts,  therefore, which were required to be paid to the deceased by his employer by way of  perks,  should  be included for  computation  of his monthly income as that would have been added to his monthly income by way of contribution to the  family  as  contradistinguished  to  the  ones which  were  for  his  benefit.  We  may,  however, hasten to add that from the said amount of income, the  statutory  amount  of  tax  payable  thereupon must be deducted.

21. If  the  dictionary  meaning  of  the  word “income”  is  taken  to  its  logical  conclusion,  it should  include  those  benefits,  either  in  terms of money  or  otherwise,  which  are  taken  into consideration  for  the  purpose  of  payment  of income  tax  or  professional  tax  although  some elements  thereof  may or  may not  be  taxable  or would  have  been  otherwise  taxable  but  for  the exemption conferred thereupon under the statute.

25. The expression  “just” must  also be given its logical meaning. Whereas it cannot be a bonanza or a source of profit but in considering as to what would  be  just  and  equitable,  all  facts  and circumstances must be taken into consideration.”

15. Ordinarily  and  subject  to  just  exceptions,  a  lump  sum  amount

equivalent  to  1/3rd of  the  income  of  the  deceased,  i.e.,  living  and

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miscellaneous  expenses  from the income should  be deducted.  [See  Sunil

Kumar v. Ram Singh Gaud & Ors. [(2007) 12 SCALE 792].

16. We may, however, note that in a case of permanent disability, where

the injured even for a very small thing would have to depend on the services

of another, a direction to deduct the said amount may not be insisted upon.  

17. Deduction of 1/3rd is, thus, the ordinary rule.   

Upon applying the aforementioned principle, the multiplicant would

be  annual  dependency  multiplied  by  life  expectancy  minus  age  of  the

deceased.

On the aforementioned premise, we may consider the applicability of

multiplier  method  for  the  purpose  of  calculating  the  amount  of

compensation.  The said method was applied in  Davies v.  Powell Duffryn

Associated Collieries Ltd. [1942 (1) All ELR 657], wherein it was held :

“The  starting  point  is  the  amount  of  wages which the deceased was earning, the ascertainment of  which  to  some  extent  may  depend  on  the regularity  of  his  employment.  Then  there  is  an estimate of how much was required or expended for  his  own  personal  and  living  expenses.  The balance will  give a datum or basic  figure which will generally be turned into a lump sum by taking a  certain  number  of  years’  purchase.  That  sum,

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however,  has  to  be  taxed  down  by  having  due regard  to  uncertainties,  for  instance,  that  the widow might have again married and thus ceased to  be  dependant,  and  other  like  matters  of speculation and doubt.”

In Trilok Chand (supra), this Court noticed as under:

“7.  The  same  principles  were  recalled  by  this Court in the case of Municipal Corpn. of Delhi v. Subhagwanti.  In  this  case  the  claim  for compensation  arose  on  account  of  loss  of  life caused  by  the  collapse  of  the  Clock  Tower abutting a highway. The Court referred to both the aforementioned  judgments,  and  extracted  the following passage from the judgment in the case of Davies :

“The starting point is the amount of wages which  the  deceased  was  earning,  the ascertainment of which to some extent may depend  upon  the  regularity  of  his employment.  Then  there  is  an  estimate  of how much was required or expended for his own  personal  and  living  expenses.  The balance  will  give  a  datum or  basic  figure which will generally be turned into a lump sum by taking  a  certain  number  of  years’ purchase.  That  sum,  however,  has  to  be taxed  down  by  having  due  regard  to uncertainties,  for  instance,  that  the  widow might have again married and thus ceased to be  dependant,  and  other  like  matters  of speculation and doubt.”

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In Helen C. Rebello v. Maharashtra S.R.T.C. [(1999) 1 SCC 90], this

Court stated the law, thus :

32. So far  as  the general  principle  of  estimating damages under the common law is concerned, it is settled that the pecuniary loss can be ascertained only  by  balancing  on  one  hand,  the  loss  to  the claimant  of  the  future  pecuniary  benefits  that would have accrued to him but for the death with the  “pecuniary  advantage”  which  from whatever source  comes to  him by reason  of  the  death.  In other words, it is the balancing of loss and gain of the claimant occasioned by the death. But this has to change its colour to the extent a statute intends to do.”.

In regard to the choice of the multiplier, Halsbury’s Laws of England

in Vol. 34, states, thus:

“However, the multiplier is a figure considerably less than the number of years taken as the duration of the expectancy. Since the dependants can invest their damages, the lump sum award in respect of future  loss  must  be  discounted  to  reflect  their receipt of interest on invested funds, the intention being  that  the  dependants  will  each  year  draw interest  and  some  capital  (the  interest  element decreasing  and  the  capital  drawings  increasing with  the  passage  of  years),  so  that  they  are compensated each year for their annual loss, and the fund will  be exhausted  at  the  age which the court assesses to be the correct age, having regard to all contingencies. The contingencies of life such as illness, disability and unemployment have to be taken  into  account.  Actuarial  evidence  is

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admissible, but the courts do not encourage such evidence. The calculation depends on selecting an assumed rate of interest. In practice about 4 or 5 per cent is selected, and inflation is disregarded. It is assumed that the return on fixed interest bearing securities is so much higher than 4 to 5 per cent that  rough  and  ready  allowance  for  inflation  is thereby  made.  The  multiplier  may  be  increased where  the  plaintiff  is  a  high  taxpayer.  The multiplicand is based on the rate of wages at the date  of  trial.  No interest  is  allowed on  the  total figure.”

The legislation being a beneficient one, the provisions thereof should

be interpreted liberally but it is also well settled that it does not contemplate

unjust enrichment.  We may, however, notice that in New India Assurance

Company Ltd. v. Charlie [(2005) 10 SCC 720], this Court held:

“14. The  multiplier  method  involves  the ascertainment  of  the  loss  of  dependency  or  the multiplicand having regard to the circumstances of the  case  and  capitalising  the  multiplicand  by an appropriate multiplier. The choice of the multiplier is determined by the age of the deceased (or that of the  claimants,  whichever  is  higher)  and  by  the calculation as to what capital sum, if invested at a rate  of  interest  appropriate  to  a  stable  economy, would  yield  the  multiplicand  by  way  of  annual interest. In ascertaining this, regard should also be had  to  the  fact  that  ultimately  the  capital  sum should also  be consumed up over  the period for which the dependency is expected to last.”

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In United India Insurance Co. Ltd. v. Patricia Jean Mahajan [(2002) 6

SCC 281], however, this Court following the earlier decisions in  General

Manager, Kerala S.R.T.C. v. Susamma Thomas [(1994) 2 SCC 176] as also

Trilok Chand (supra), held :

“16. What thus emerges from the above decisions is  that  the  court  must  adhere  to  the  system  of multiplier  in  arriving  at  the  proper  amount  of compensation,  and  also  with  a  view to  maintain uniformity and certainty. Use of higher multiplier has been deprecated and it  is  emphasized that  it cannot  exceed  18.  The  multiplier,  as  would  be evident from the observations quoted earlier, may differ in the peculiar facts and circumstances of a particular case as according to the example cited, where a bachelor dies at the age of 45, the age of his  dependent  parents  may  be  relevant  for selecting a proper multiplier. Meaning thereby that a  multiplier  less  than  what  is  provided  in  the Schedule could be applied in the special facts and circumstances of a case. In the later cases also this Court  has  taken  the  same  view  that  multiplier system is  a more appropriate  and proper method for calculating the amount of compensation.  Lata Wadhwa v.  State  of  Bihar may  be  referred  to. Decision  in  the  case  of  Susamma  Thomas and other  English  decisions  considered  in  the judgments  referred  earlier,  namely,  Davies v. Taylor,  Davies v.  Powell  Duffryn  Associated Collieries  Ltd. and  Mallett v.  McMonagle have been referred to.”

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18. By and large, therefore, the Court had proceeded on the basis that the

multiplier  mentioned  in  the  Second  Schedule  should  be  taken  to  be  the

guide but it may not be.

19. The multiplier specified in the Second Schedule may not be decisive

for calculating compensation in cases of death.  In fact, the word multiplier

has been used only for the purpose of calculating damages in the case of

permanent disability and not in the case of death as would appear from note

5 and 6 appended thereto.   

20. The  Second  Schedule  provides  for  payment  of  the  amount  of

compensation  to  the  persons  whose  income  is  from  Rs.3,000/-  to

Rs.40,000/-  per  annum, depending  upon  the  age  of  the  deceased;  as  for

example if the age of the deceased is 15 years, the amount of compensation

payable would be 60,000/-, but where the annual  income is Rs.3,000/-, a

sum of  Rs.50,000/-  has  been  specified  therefor  even  if  the  age  of  the

deceased is between 35 to 65 years.   

21. The Parliament had, therefore, thought that Rs.50,000/- should be the

minimum amount of compensation payable to legal representatives of those

persons  whose  annual  income  is  Rs.3,000/-  per  month.   For  the  said

purpose, the multiplier specified in the Second Schedule has no role to play.

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Even in absence of the multiplier in the Second Schedule, the amount of

compensation  payable  would  be  the  same  irrespective  of  the  multiplier

specified therein.

22. We may, however, notice that in a given case even in terms of the

Second Schedule where the compensation is payable on the basis of a no

fault  liability,  the  amount  of  compensation  may be  higher  than  the  one

which has been specified in the Second Schedule in case of a fault liability.

23. The question, in an appropriate case, may require consideration by a

larger Bench.

24. In this case, however, the deceased was a businessman.  What was the

actual  loss  of  dependency to  the  family  was  his  contribution  to  run  the

business.   The  assets  of  the  business  remained.   The  amount  of

compensation, therefore, was required to be determined keeping in view that

factor in mind.

25. Application of the multiplier of 10, therefore, cannot be said to be bad

in law.  In terms whereof the amount of compensation would come out to

Rs.12,50,000/-, although the High Court, in our opinion, might not, thus, be

entirely correct in opining that the remaining loss could be made good.  We,

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however, need not delve into the said question any further as we are of the

opinion that the ultimate decision of the High Court is correct.

26. We, therefore, do not find any merit in this appeal, which is dismissed

accordingly.   However,  in  the  facts  and  circumstances  of  the case,  there

shall be no order as to costs.

………………………….J. [S.B. Sinha]

..…………………………J.     [Cyriac Joseph]

New Delhi; April 8, 2009

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